NSE Kenya – new listings

The fact remains that majority of the stock exchanges in Africa lack the depth and trading volume & value is dominated by 2-3-4 big companies, for example on NSE Kenya 3 out of the 62 listed companies account for 80% of trading value. Past attempts at GEM (Growth and Enterprise / SME) have failed in Kenya and this time CMA (Capital Markets Authority) is taking a 180 degree turns to ease listing requirements for multi billion dollar enterprises.

More listings of large companies will diffuse that risk, he said.

Muthaura said part of the explanation to companies is that it may be cheaper for them to raise capital by listing their shares than via traditional alternatives, such as financing from banks or private equity.

Public disclosures that will accompany a listing are another factor making some firms reluctant, he added, as they fear putting out such information risks revealing business secrets to their competitors.

Muthaura says the success of Safaricom shows such fears are misplaced.

“We have four mobile network operators, only one listed. And the one listed one is by far the most competitive and growing the most aggressively,” he said.

Muthaura did not name any companies that might be planning Kenyan listings but said an industry masterplan had set targets of at least three or four listings a year for the period to 2023.

Whilst CMA’s goal is to diffuse the risk of trading concentration in a few counters, make no mistake, my aim is simply to make money by increased volumes in trading activity.

Stock exchanges are fascinating regulatory beasts that survive the march of technology. In Norway for example 50% of the trading value was in whaling companies (whale oil) from 1920-1936. NYSE also moved across industries like shipping, ports/bridges, industrials, technology. The NYSE exchange evolved from a meeting of 24 stockbrokers under a buttonwood tree in 1792 on what is now Wall Street. It took another 50 years when many investors suffered heavy losses, that NYSE began to demand that companies disclose to the public information about their finances as a condition of offering stock. And now? everybody wants to double their money in SME / IPO listing in 3 months 🙂

In short, I cannot find a single failed exchange business, all listed exchanges are making 10-20-30 year and lifetime highs from Australian Stock Exchange, London Stock Exchange to Johannesburg Stock Exchange. So long as they are a regulated monopoly, how could you NOT make money?

So far, since my investment in 2014-2015 in NSE Kenya has not paid off, but I am hoping I am at the bottom of the J curve and that in 20 years from now there will be 1000 companies listed once the momentum picks up. Small dream is a crime.

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One of the reasons Stock Exchange is a profitable business, the world over is, that its bureaucratic enough to be a money spinning monopoly, and the holding is distributed enough so that money does not end up in amnesty/subsidy/government dole outs. In short a private enterprise that is allowed to be a monopoly like a toll bridge or listed Eiffel Tower.

On Wednesday, May 16, 2018, Views on Life & on Equity Investing wrote:

> amitdipsite posted: “I must have written 20 times on my blog about this > Monopoly stock exchange in Kenya. https://lifeandequities.wordpress.com/ > ?s=nse+kenya The fact remains that majority of the stock exchanges in > Africa lack the depth and trading volume & value is domi” >

Hi Amit, like you said small dream is a crime, any guesses how long I have to wait in India to get a good business like you had earlier identified like Hawkins, ttk, relaxo or bajaj finance….or it’s almost impossible now.
Regards,

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Amit Arora

B.Com(Hons) Gold Medalist - Delhi University, MBA.

Served United Nations between 2001-2006 in Europe.

Since 2007 consultant for Inland Revenue, Ministry of Economic Development, Ministry of Social Development, Ministry of Justice, Ministry of Business Innovation and Employment (NZ Govt. Organisations).